UK’s development finance institution CDC Group plc is committing $50 million or Rs 245 crore as an anchor investor to Pragati Venture and Incubator Fund, a private equity fund focusing on the eight poorest states in India.

Pragati Equity Advisors, the fund manager, plans to make commercially sound investment opportunities in under-invested parts of India, which include states like Bihar, Jharkhand, Madhya Pradesh, Chhattisgarh, Uttar Pradesh, Rajasthan, Orissa and West Bengal. These states are home to some 421 million people who are defined as ‘multi-dimensionally poor,’ according to the Oxford Poverty and Human Development Index.

Incorporated in 2011, Pragati India Fund is led by Narayanan Shadagopan, who has been an investment banker in New York and London.

Pragati, a sector-agnostic fund, will primarily invest in areas like healthcare, ancillary infrastructure services, ancillary oil and gas services, manufacturing and education. The target companies will be at a stage where they require professional management and processes in order to grow, the statement added. The PE firm, which has offices in Delhi and Mauritius, will make investments in the range of $5 million-$15 million.

CDC’s commitment to Pragati comes as Limited Partners are increasingly looking for exposure to investments beyond India’s metros, which will include tier II & tier III towns besides rural areas. Recently Aavishkaar Venture Management, a venture capital firm focused on India’s rural areas and bottom-of-the-pyramid space, has made the at $62 million within nine months after its launch.

“CDC is making a significant investment in Pragati because it is a pioneering venture, with the potential to bring economic development to the poorest states of India. Several years ago, CDC was among the first investors in private equity funds in India and as the mainstream market is now better served by capital, it is right that our focus turns to states where there is little history of private equity investment,” said Anubha Shrivastava, CDC managing director (Asia).

The CDC Group has recently changed its investment strategy under which it will also look at direct investments and use instruments like debt.